2016: Naughty or Nice?

Regulatory enforcement, FCPA, SEC, FINRA, CFPB, CFTC

Regulators Fared Well in 2016

As 2016 draws to a close, mainstream media reports will be filled with all sorts of interesting—and not so interesting—statistics on everything from how many baby girls were named “Abigail” to how many baby boys were named “Zack,” the number of pizzas consumed on college campuses, which cellphone manufacturer had the most recalls, and how many ducks safely made it across a certain highway in northern Minnesota. But our statistics are, of course, much more fascinating and certainly more germane to your business governance. So let’s get started with our first annual Regulatory Year in Review.


The SEC was quite busy this year in its continuing quest to make enforcement of the Foreign Corrupt Practices Act (FCPA) a high priority. Enforcement of the act, which “prohibits companies issuing stock in the U.S. from bribing foreign officials for government contracts and other business,” raked in over $2 billion in settlement of FCPA violations. Among the “winners” this year were a US investment bank—“corruptly influenced government officials and won business in the Asia-Pacific region by giving jobs and internships to their relatives and friends” (fined $264 million); a Brazilian-based aircraft manufacturer—“violated the FCPA to win business in the Dominican Republic, Saudi Arabia, Mozambique, and India” (fined $205 million); and a US hedge fund —“use of intermediaries, agents, and business partners to pay bribes to high-level government officials in Africa” (fined 412 million). The top violator: a Dutch-based telecommunications provider that paid $795 million to settle charges of violations of the FCPA to win business in Uzbekistan.


The U.S. Commodity Futures Trading Commission filed sixty-eight enforcement cases that “addressed a sweeping range of misconduct and market harm.” According to the CFTC website: “During FY 2016, the CFTC collected and deposited at the U.S. Treasury over $484 million in civil monetary penalties, nearly double the CFTC’s operating budget for FY 2016. Furthermore, the CFTC this year secured over $748 million in civil monetary penalties and $543 million in restitution and disgorgement orders, bringing the CFTC’s total monetary sanctions for FY 2016 to over $1.29 billion” (source: www.cftc.gov). The CFTC charges included manipulation, spoofing, and unlawful use of customer funds. The CFTC also issued a whistleblower award of more than $10 million, marking the largest such award since Congress created the CFTC Whistleblower program in 2010.


The Financial Industry Regulatory Authority is poised to impose 2016 sanctions totals exceeding last year’s record by 70 percent, or approximately $160 million, for this year including fines and restitution. However, because only eleven fines exceeded the $1 million threshold, the bulk of the sanctions were for lesser—and some might say “unimpressive”—amounts. The largest was a $20 million fine and only three others exceeded $5 million each. That leaves the bulk of the assessments resulting from numerous smaller enforcement cases. The emphasis this year was on cases involving variable annuity infractions (source: www.investopedia.com).


Notwithstanding the fact that a federal appeals court ruled in October that parts of the “leadership structure” of the Consumer Finance Protection Bureau were unconstitutional, the agency nevertheless assessed record sanctions in 2016 including the highly publicized $185 million in sanctions against Wells Fargo for opening “ghost accounts” unbeknownst to customers, and the $28.5 million in fines and restitution levied against the Navy Federal Credit Union, the nation’s largest credit union. Although the totals are not yet in for 2016, since it opened for business in 2012 under a Dodd-Frank mandate, the CFPB has assessed $5 billion in fines and restitution as calculated through March 2016. This year it went after payday loan companies (over $500,000 in one case) and reverse mortgage lenders (about $800 million total for three companies) heading to top its almost $1 billion annual average.

How was business in your state in 2016? In Washington, DC, it was “just fine.”

After receiving his Juris Doctor degree from The John Marshall Law School in Chicago, Mr. Brochin served as an Administrative Law Judge with the Illinois Department of Labor for six years. Following that position, he was a solo practitioner in the fields of Real Estate Law and Commercial Contracts Transactions for twenty years. In 2003, he was recruited to head an outsource title research company in Israel, and since 2007, he has engaged in litigation support for several high profile cases. He has taught Business Law as a faculty member of the Jerusalem College of Technology, and for the past three years, he has authored a wide variety of legal White Papers and timely legal articles as a professional legal content writer.

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